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Capitalist theory asserts that CEOs rise to the top based on merit and moxie and deserve million dollar pay packages. Turns out, though, capitalism doesn’t really work that way.

The Washington Post and federal investigators are hounding Robert F. McDonnell, the Republican governor of Virginia, for taking more than $150,000 in cash and gifts from the CEO of Star Scientific, Jonnie R. Williams Sr.

Gov. McDonnell, a former businessman himself, apparently just didn’t understand that politicians can’t self-deal the way CEOs do. A state’s chief executive can’t accept a $6,500 Rolex watch engraved “71st Governor of Virginia” from a CEO with a history of trouble with the law and a clear desire to get something in return. But between corporate executives, well, there’s few holds barred on such shady transactions.

Capitalist theory asserts that CEOs rise to the top based on merit and moxie and deserve million dollar pay packages. Turns out, though, capitalism doesn’t really work that way. Conniving Jonnies rule the business world. First they ditched the philosophy that corporations are equally responsible to America, shareholders, workers, customers and communities. Then they enshrined CEOs as corporations’ primary beneficiaries, thus golden parachutes awarded to failed and fired executives. In the real world, CEOs rise to the top based on cronyism and corruption.

IPS found that more than one in three—actually 38 percent—of these top-paid CEOs led firms that were bailed out or failed in the 2008 financial crisis; paid fraud-related settlements or fines, or got fired—landing softly in a sizeable pile of go-away cash.

Jonnie R. Williams Sr. never appears on that best big bucks list. But his pay from Star Scientific is hardly paltry despite the firm’s poor performance, and his relationship with Virginia’s governor provides an appalling example of the corrupt crony system.

The governor has said he provided no more help to Star Scientific than he would any company and that he hung out with Jonnie because they were old friends. “I admire people who are entrepreneurial,” the governor said of Jonnie.

Entrepreneurial. Right. This is a guy who was fined for fitting contact lenses without a license and whose optical business collapsed leaving tens of thousands of dollars in debts. This is a guy who paid $295,000 after the Securities and Exchange Commission accused another medical business he ran of falsifying claims.

That’s the failed entrepreneurialism the Institute for Policy Studies found repeatedly as it looked at the performance of the CEOs paid the best big bucks.

Among those CEOs, who should be the best and the brightest based on the capitalist measure of the fattest paychecks, 22 percent headed firms that got bailed out after the market crash in 2008 or whose firms disappeared completely.

Among them is Richard Fuld. The former CEO of Lehman Brothers, once the nation’s fourth-largest investment bank, appeared on the best big bucks list for eight consecutive years, including 2007 when he pulled down $40 million. The next year, Lehman went bankrupt, precipitating the Wall Street crash. Bad work rewarded with big bucks: that’s corruption.

Twenty-seven of the best big bucks CEOs got fired, were forced to retire, or lost their jobs when their companies went belly up. Twenty-three of them, including those whose firms were failing or were charged with financial fraud, floated merrily away on golden parachutes. The average value of those go-away packages was $48 million. More bad work rewarded with big bucks.

The IPS report notes, “An alarming number of CEOs are not adding exceptional value to our economy. They are extracting vast sums from it.” No matter CEO performance, the report says the chief executives take increasing millions for themselves while high unemployment lingers and economic recovery slogs.

The IPS report suggests methods to control CEO pay, including actually enforcing provisions of the Dodd-Frank financial reform law. In addition, corporations must be required, as they did in the 1950s and 1960s, to serve the nation, customers, workers and communities as well as shareholders and CEOs.

And for capitalism to work, corruption and cronyism must be punished. That means you, Jonnie and Gov. McDonnell.

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Leo Gerard is international president of the United Steelworkers Union, part of the AFL-CIO. The son of a union miner; Gerard started working at a nickel smelter in Sudbury, Ontario, at age 18, and rose through the union's ranks to be appointed the seventh international president Feb. 28, 2001. For more information about Gerard, visit usw.org.

BAD POLICYTwo different approaches----Add Taxes to Increase Revenue and lower the Deficitthe Democratic approach.---GOP--Cut expenditures especially in the entitlement area plus Food Stamps-Meals on Wheels to cut spending and lower the deficit.It takes both approaches to eliminate the deficit and lower that awful debt.Raise taxes on the wealthy few versus cutting services to the huge masses.Mark Zandi, chief economist for Moody's Analytics said “the fiscal contraction will be the biggest since government drew down from World War II.” Close to one million workers, one third of the Federal work-force, will be furloughed for an average of 13 days through September.Douglas Holtz-Eaken of CBO said “the Sequester is way better than raising taxes and way worse than fixing the mandatory spending programs and Republicans know that.” The administration continues to press Congress to replace the sequester with a balanced Deficit Reduction plan.The administration increased the Deficit with it's Stimulus package and Payroll Tax Cut.It is time to remove the Payroll Tax cuts and Bush Tax Cuts. Stop nit-picking cuts like Food Stamps and go after Defense and Medicare the big bucks.

Posted by clarenceswinney on 2013-09-16 16:22:22

Quote:Capitalist theory asserts that CEOs rise to the top based on merit and moxie and deserve million dollar pay packages.endI wouldn't call it a theory as much as an assumption. They genuinely believe that the affluent classes, corporate, financial and political, have somehow earned their money. They haven't. They've done nothing more than maneuver toward good fortune, and their success represents amoral cunning more than "merit and moxie." They live in an indifferent world, and that indifference is what allows them to continue in their amorality. When someone gives the public the means to judge what "their betters" are doing on a continuum of right and wrong, then things might change.

For now, being non-judgmental is the intellectual fashion, and it allows every kind of behavior for simple material gain.